If you are a fan and follow the craft beer industry -- from both a business and consumption standpoint -- then you are probably aware of the slate of craft beer industry acquisitions that have left many fans disappointed.

To understand why fans are unhappy, you first need to know that the craft beer industry has seen meteoric growth over the past decade, nearly doubling the number of total US breweries in just that past five years from 3,800 to 7,450, according to the Brewers Association. 

This growth is great for craft beer aficionados, who are passionate and fiercely loyal to the craft. And as consumer experiences continue to be a differentiation for younger consumers, craft breweries provides one of the few unique experiences still available, with every craft brewery offering a highly differentiated beer selection and often a completely distinctive and personalized encounter.

This unique experience is so important that fans will often revolt dramatically when there is any sign of a small craft beer sticking a little toe in and testing the big corporate waters. Case in point is Petaluma-based Lagunitas Brewery, which in 2015 sold a 50 percent stake in its company to Heineken. Even though the acquisition still left Lagunitas with autonomy to make its own beer under its own label, social media erupted with angry fans and more than a few calls to boycott the craft brewery.

The grumbling died down, and when Heineken purchased the rest of Lagunitas in 2017, the less-loyal fans had already defected to one of the many other options available.

The acquisition spree continued this year, as craft beer stalwarts Dogfish Head Brewery was acquired by Sam Adams (Boston Beer Company) and Kona Brewing (Craft Beer Alliance) is in the process of being acquired by Anheuser Busch InBev SA's. And this week, New Belgium Brewery Company, the fourth largest US craft beer company in 2018, according to the Brewers Association, announced it has agreed to be acquired by Lion Little World Beverage, which is owned by Japan's Kirin Holdings Co.

Kim Jordan, the co-foudner of New Belgium, an entirely employee-owned operation, justified the acquisition in a statement saying, "Over the life of our ESOP (employee stock ownership plan), including this transaction, the total amount paid to current and former employees will be nearly $190 million. We will have helped a significant number of people realize the upside of having equity in something, being a part of the American Dream!" 

New Belgium was one of the last, big-named craft brewery holdouts, and one that craft beer fans would point to as validation for how craft beer can compete without the influence of big corporate beer companies.

So why did it finally capitulate? According to MarketWatch.com, "New Belgium was struggling to stay independent at such a large scale, amid intense competition from a new generation of craft breweries that has doubled the total of such businesses in just four years ... and was struggling to meet cash demands of the ESOP and selling stockholders while expanding the business both in production and branding."

In other words, the reason so many craft breweries are "selling out"? Survival.

Consider first that while the number of breweries has nearly doubled in five years, the total dollar market share for craft beer during this same time has only increased from 19.3 percent to 24.1 percent (Brewers Association). That 4.8 percent increase is a remarkably small increase to be divvied up between so many new companies.

The second significant factor is that it is not cheap to run a brewery. According to Brewbound.com, breweries run on a razor thin gross margin of roughly 20 percent, an incredibly small margin when you consider the operating costs of running such a complicated operation.  

Third, brewers are often hampered with financing costs, as the cost to start a brewery can range from $250,000 for a microbrewery all the way to $2.5 million for a larger establishment, according to Incfile.com. In order to scale, breweries are faced with expanding equipment to handle the growth, and because of the thin margins, this cost is often financed.

Lastly, like any industry that is highly fragmented but largely controlled by an oligopoly of companies, gaining market share through marketing and securing shelf space can be an overwhelming task when already operating on thin margins and financing growth.

In this situation, entrepreneurs can either continue to struggle, operating month-to-month, and grind it out -- or they can join forces with a well-capitalized company that has both the resources and expertise to help the company grow.

Merger or acquisition is not the only answer, but it is clear that the small US breweries are seeing it as the most viable path to sustained growth -- and survival. And while craft beer fans may struggle with this reality, we can all take solace in the fact that these moves assure that our favorite beers will continue to be made and available to us for the foreseeable future.